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Measuring Persistence in Inflation: Evidence For angola

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  • José Manuel Belbute
  • Leonardo Dia Massala
  • Júlio António Delgado

Abstract

Understanding inflation persistence in Angola is crucial because National Bank of Angola has approved in 2012 a new monetary policy operational framework which upgrades and expands the set of instruments to achieve its monetary goals. The purpose of this paper is to measure the degree of persistence of the headline, food, energy, underlying and 10% trimmed core inflations for Angola and to identify its implications for decision-making. Using both a traditional univariate method and non-parametric approach, our results suggest the presence of a statistically significant level of persistence in five inflation indicators for Angola. Moreover, the degree of persistence is similar both across the five inflation indicators and also across the sample period. Finally, our results also confirm that extracting the most volatile components of the headline inflation indicator does not generate a new inflation indicator that is less volatile and more persistent than the original. These results have important implications for the design, the implementations and the effectiveness of the monetary policy, specialty when under an inflation targeting regime. First, since shocks tend to temporarily deviate inflation from its trend value a permanent policy stance is required. Secondly, a low degree of persistence means that monetary policy aiming price stability can only be implemented in a favorable setting with a permanent policy stance. Moreover, a low degree of persistence means that inflation can be stabilized in a short period time following a shock. Finally results are also relevant for prediction and modeling purposes.
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Suggested Citation

  • José Manuel Belbute & Leonardo Dia Massala & Júlio António Delgado, 2016. "Measuring Persistence in Inflation: Evidence For angola," South African Journal of Economics, Economic Society of South Africa, vol. 84(4), pages 594-606, December.
  • Handle: RePEc:bla:sajeco:v:84:y:2016:i:4:p:594-606
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    File URL: http://hdl.handle.net/10.1111/saje.12118
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    Cited by:

    1. Francis Leni Anguyo & Rangan Gupta & Kevin Kotze, 2017. "Inflation Dynamics in Uganda: A Quantile Regression Approach," School of Economics Macroeconomic Discussion Paper Series 2017-07, School of Economics, University of Cape Town.
    2. José Manuel Belbute & Leonardo Dia Massala & Júlio António Delgado, 2016. "Measuring Persistence in Inflation: Evidence For angola," South African Journal of Economics, Economic Society of South Africa, vol. 84(4), pages 594-606, December.

    More about this item

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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